The Colorado Division of Real Estate is extending its requirement that mortgage brokers be licensed with the state to include employees of federally and state-chartered banks.
Originally, the state said brokers working for Federal Housing Administration-approved lenders would not need to register. But in reviewing the statute, the Division of Real Estate determined it was meant to cover everyone, said Department of Regulatory Agencies spokesman Chris Lines.
“That includes employees in any institution who originate or negotiate loans in any way,” he said.
Chris Holbert, president of the Colorado Mortgage Lenders Association, said the decision conflicts with existing legal precedent.
He pointed to a U.S. Supreme Court decision that found Wachovia Bank’s mortgage business was part of a national bank, so it must be overseen by the Office of the Comptroller of the Currency and was not subject to the rules of individual states.
“State regulation is not permitted to include the federally chartered entities or their employees,” Holbert said. “No state includes all loan originators in their licensing program because states aren’t allowed to do that.”
Under Colorado’s existing statute, which took effect Jan. 1, 2007, mortgage brokers must clear a background check, pay a fee and post a surety bond of $25,000. Those with theft, fraud or other serious convictions within the past five years, or who have lost their mortgage-brokerage licenses in other states, can’t be registered and can’t legally make loans.
“I’m aware of some circumstances in which brokers couldn’t pass the background check and have sent applications to go work for a bank,” said Doug Braden, president of the Colorado Association of Mortgage Brokers. “We feel that if you’re going to protect consumers, they should be protected from all avenues.”
This article has been corrected in this online archive. Originally, due to an editing error, a photo caption said Colorado Mortgage Lenders Association president Chris Holbert opposes the state’s decision that mortgage brokers who work for banks must apply for licensing. Holbert says that while the CMLA questions the decision, he does not oppose it and is not a critic of it, as the headline with the story also said.
